Since the start of 2021, Dogecoin (DOGE) has sat in the spotlight as its growing community of retail and business-class level supporters have orchestrated a coordinated push to send the popular meme-coin to the $1 level.
Most recently, DOGE pulled off a 10x gain as it rallied to $0.74 in the past week. The breakout was fueled mainly by Tesla CEO Elon Musk and his constant mentions of the token on social networks and interviews. Surprisingly, as Musk debuted on Saturday Night Live on May 8, Dogecoin price corrected by 42% even as Musk, his mother, and SNL actors mentioned DOGE in various skits.
This event led to something rather unusual as DOGE traded over $130 billion over the past week, while its market capitalization stands at $65 billion. This raises the question of whether the largest whales were involved or if futures contracts played an essential role in the crash?
Musk's SNL appearance boosted expectations
Regardless of the world's second wealthiest person's motivations, Musk's Saturday Night Live appearance appeared to have marked a price peak. Most likely, the event was highly anticipated, therefore causing the typical "buy the rumor, sell the news" price action.
It is not clear why the billionaire has taken such an intense interest in DOGE. Some say this trolling reflects just a personal hobby rather than a core belief that Dogecoin can reform the entire monetary system.
Moreover, Google searches for the meme coin managed to surpass the leader Bitcoin (BTC), an absolute victory for its fan base, including Mark Cuban, the owner of the Dallas Mavericks NBA team.
Whales are accumulating, not dumping
Dogecoin is highly concentrated, as the top109 addresses hold 67.4% of the supply. The largest holder is relatively new, created in February 2019. However, tracing previous transactions leads to another address formed in July 2018 and coincides with Robinhood's DOGE trading launch.
As depicted above, the top-14 addresses added a net 4.66 billion DOGE over the past 30 days. In fact, only the ninth-largest addresses sold coins over the past seven days. Even if one extends the analysis to the top-50 addresses, there has been a 4.36 billion DOGE net add.
Currently ranked as number 21, this address reduced its position by 3.43 billion coins. All of the top-20 addresses from three weeks ago now remain as holders in the top-75 ranking.
Therefore, there's absolutely no evidence that whales massively reduced their positions as Dogecoin made a 10x gain.
Futures markets also are not to blame
Data also suggests that futures markets did not play a significant role in the most recent price action. If that had been the case, there would have been considerable volume and liquidations.
From a volume perspective, there has been a 290% increase over the previous week. Although far from a $54 billion peak on April 16, these derivatives markets could have certainly played a part in Dogecoins' incredible rally.
However, large volume does not necessarily cause a price impact, let alone a 100% weekly gain. Therefore, one should also analyze liquidations, the orders forcefully executed by derivatives exchanges to close positions whose margin eroded.
A brutal price oscillation on April 16 caused $726 million of both longs and shorts to be liquidated, as shown above. Over the past week, more longs have been liquidated than shorts, which signals that the upwards move did not catchsellers off-guard.
The $340 million worth of buy orders caused by short sellers' forced liquidations over the past week seems small considering the $28 billion average daily futures volume.
Therefore, this movement seems entirely retail-oriented as there are no signs that the top-50 addresses exhibited unusual activity, nor have there been large liquidation orders in the futures markets.
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